To Employers: How to change terms of an employment contract without risking a law suit

It is not uncommon for employers and employees to seek to have changes in terms of their engagement, and it is not illegal either for the parties to propose such amendments. However, the critical position is that the employer cannot alter the terms of an employment contract without consulting the employee. A decision taken in consultation with another is one that is taken after a discussion with the other party about the thing that is being decided, and both parties have reached a concurrence.

Section 10(5) of the Employment Act 2007 states that where any matter stipulated in subsection (1) changes, the employer shall, in consultation with the employee, revise the contract to reflect the change and notify the employee of the change in writing. The wording of the section is couched in mandatory terms an indication that the employer cannot unilaterally revise the contract unless there is consultation.

Subsection (1) provides that Subject to Section 42(1), an employer shall, before terminating the employment of an employee, on the grounds of misconduct, poor performance or physical incapacity explain to the employee, in a language the employee understands, the reasons for which the employer is considering termination and the employee shall be entitled to have another employee or a union representative of his choice present during this explanation.

Failure to follow the procedure would expose the employer to possible action for constructive termination. Constructive termination arises where the employer in the absence of any justifiable reasons for dismissal, proceeds to create an environment where the employee reasonably believes that the employer no longer wishes to be bound by the terms of the employment contract.

It’s however not enough for the employee to claim constructive termination, the employee must prove that (1) He or she resigned as a result of the changes;(2) the changes were unilaterally made without consultation;(3) the situation was so intolerable that the employee was left with no option but to resign; and that the employee reasonably believed that the employer would not abandon the pattern of creating a toxic working environment.

How to handle the situation as an employer

Because the employer is in the business of making profit, a situation should not arise where the employer is forced to keep an employee under terms that are not reasonably sustainable under the prevailing economic circumstance. But to change the terms unilaterally would expose the employer to the risk of having to defend a suit which again would put a strain on the employer.

The way forward is to call the employees and have a discussion about the issue. Explain to them economic strain that the business may be experiencing and why would be in their best interest to re-engage under the proposed new terms. Let the employee know that should the situation change for the better then the employer would not hesitate to improve the said terms.

If the employee is agreeable to the new terms, the employer should communicate the same terms to the employee but this time in writing in and have them sign to the proposed terms. If the employee is not agreeable with the new terms, the employer can opt for a Separation by Mutual Consent Agreement or to the very last initiate redundancy procedures.

Oscar Onyango

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Email: [email protected]

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Employment and Labour Laws,Kenya